Hambantota Port development stuck at Framework Agreement

Development of the Hambantota Port was stuck at the Framework Agreement stage, says the Chinese Ambassador Yi Xianliang.Asked as to when development of the Hambantota Port would be completed, the Ambassador smiled and said in Colombo, last week “No progress.”

When asked to explain what he meant, Yi said that what had been signed on July 29 this year was only the Framework Agreement reached after over a year of discussions between the Sri Lanka Ports Authority and China Merchant Port Holdings (CMPH).Several sub-agreements would also have to be endorsed by both sides for work to proceed, he added.

The Ambassador said that even after all relevant agreements were signed, a port without the proposed Industrial Zone adjoining it being established would be of no use.Asked if CMPH was willing to amend the Hambantota Port Agreement as requested by President Maithripala Sirisena, the Yi pointed out that it was a business agreement.”It has already been finalized. So, how do we alter it? Can you be listening to 22 million people at the same time? Bold decisions are called for,” he said.

Under the agreement, port operations would be entrusted to two joint ventures (JVs). CMPH would hold 85 percent of shares in the JV established for handling terminal operations, while the SLPA would have control over 50.7 percent of the shares in the JV for common user facility operation. In return, the CMPH would pay USD 1.1 billion upfront to SLPA.

Twenty per cent of ownership of the port can be bought back by Sri Lanka within the first 10 years. In 70 years of the agreement, Sri Lanka can buy back all shares at a fair value and take over majority control. In 80 years 40 percent can be bought back for one US dollar. In 99 years all shares will come back to Sri Lanka for a token one US dollar.